S&P500: The time has come for the bears

American stock indices try to fall in an organized way after two halts due to excessive losses while the technical puzzle begins to square with a long-term scenario, post-bull market 2009-2020. Any order should be placed with very tight stops and a decision to execute them, Tomás Sallés from FXStreet advises.

Key quotes

“We see that this first bearish move has taken the price straight down to the 23.6% retracement level of the entire rally since 2009. The fact that the first major downturn has stopped here gives validity to the big scenario.” 

“In the DMI indicator, we see how bears have reached a level only surpassed during the fall of Lehman Brothers, and we have gotten really close to that point. 

“According to traditional theories, bear markets last between 1/4 and 1/3 of the duration of the previous bull market. If this happens this time, we can be talking about two-to-three years of a bearish market. 

“It is essential to give yourself time before you go looking for bargains. In panicked markets, selling irrationality can outweigh the buying irrationality by some degrees of magnitude.”